BOK chief raises need to avoid currency label

The head of the country’s central bank raised the need on Thursday for preemptive efforts to ensure Seoul will not be designated as a currency manipulator when the U.S. Treasury issues its foreign exchange report next month.

“I don’t think that there is a high possibility that South Korea will be labeled as a currency manipulator,” Bank of Korea Governor Lee Ju-yeol said.

Still, he sounded a cautious note on the looming U.S. decision in April, noting the possibility of Korea being branded as a manipulator cannot be ruled out. “[In case Korea is labeled as a manipulator,] a bilateral discussion will take place,” he said. “Then we need to make efforts to correct the situation through the discussion channel.”

His remark represents a more proactive stance because he refrained from commenting on “What if” questions about currency manipulator.

He said Korean officials have explained Seoul’s financial market conditions and factors driving up trade surpluses during meetings with officials from the U.S. government and the International Monetary Fund.

Korea was put on a monitoring list by the U.S. Treasury Department last year due to a significant bilateral trade surplus with the United States and other factors.

Lee stressed the importance of taking steps beforehand to avoid the designation.

Separately, Lee called for measures to keep household debt from increasing at a time when interest rates are set to rise.

Korea’s outstanding household credit - which comprises household loans and credit card spending - came to 1,344.3 trillion won ($1.19 trillion) at the end of 2016, up 11.7 percent from a year earlier.

Last week, the U.S. Federal Reserve raised its key rate by a quarter of a percentage point to a target range of 0.75 to 1 percent. It also signaled that additional hikes would be made gradually this year.

The BOK maintained its policy rate at an all-time low of 1.25 percent for the eighth consecutive month in February to support the growth of Asia’s fourth-largest economy. The BOK has no monetary policy meeting this month.

Some critics say that the BOK’s moves to cut its benchmark rate resulted in the surging amount of household debt as people are tempted to borrow at lower interest rates.

But Lee explained the rate cuts in 2014 and 2015 were necessary to shore up the economy hit by headwinds such as the Middle East Respiratory syndrome.

BY PARK EUN-JEE, YONHAP [park.eunjee@joongang.co.kr]